Markets tread water on election, earnings concerns

Investors remain unwilling to make any major market commitments as earnings concerns and election uncertainty weigh on the Nasdaq and Dow.

January 2, 20024:43 PM PST

Investors remained unwilling to make any major market commitments Friday, as earnings concerns and election uncertainty weighed on the Nasdaq and Dow.

The Nasdaq composite index closed down 4.67 at 3,027.21, while the Standard & Poor's 500 index fell 4.61 to 1,367.71. The Dow Jones industrial average dipped 26.16 to 10,629.87.

All three markets closed practically unchanged from last week. Investors seemed to put trading on hold until a winner emerges in the presidential election.

"There's a lot of cash on the sideline waiting for a resolution," said Arthur Hogan, chief market analyst at investment firm Jeffries & Co.

An early morning pop in the markets, which coincided with news that the election could be determined soon, sent the Nasdaq up 60 points and the Dow more than 100 points. Hogan said that was evidence that investors are prepared to step back into the markets once the political questions are settled.

A Florida judge ruled Friday morning that the state's top election official, a Republican, acted properly in refusing to accept any hand-counted ballots submitted late. The move was seen as a step towards a resolution to the election, since the present vote tally favors Texas Gov. George W. Bush.

But a definitive end to the presidential election will not likely erase all of Wall Street's worries.

"A state of nervousness in technology" in general has been sapping the Nasdaq for months, noted Mark Donahoe, managing director of institutional trading at U.S. Bancorp Piper Jaffray. "The trend is still to pare down (portfolio) exposure to technology stocks."

Earnings news drained some of the markets' morning enthusiasm. Shares of BellSouth fell $7.25, or about 15 percent, to $42 after the Baby Bell warned that its per-share earnings next year would grow by 7 percent to 9 percent, down from a previous forecast of 13 percent to 15 percent.

Large cap stocks managed to keep the Nasdaq from a major collapse. At the end of regular trading, Microsoft ticked up 13 cents to $69.06 on a volume of more than 53 million shares, making it the most actively traded stock on the Nasdaq.

Sun Microsystems closed up $2.06 to $89.31. Based on general jitters in the technology sector, Sun dropped to a daily low of $85.38, but it was boosted by favorable analyst comments in response to a company conference call Thursday.

Shares of Commerce One, which creates software that lets companies build Internet marketplaces, fell $5.69, or almost 11 percent, to $47.63 on speculation that fourth-quarter profits may miss forecasts. Volume nearly reached 32 million shares, more than three times the stock's average daily volume of 9.9 million shares.

Jefferies analyst Richard Williams said he overheard speculation that the company circulated a pessimistic memo to employees. The rumored memo suggested the company wouldn't meet analyst expectations for the fourth quarter, Williams said.

The company has denied the rumors, according to a Reuters story, but Williams still believes the company's growth rate might slow in the next few months.

"We see a slowdown in their business because a product is not ready to ship to the company's major customers," he said. The software, which helps create online trading exchanges, may take three to six months to finalize, he added.

Ariba also had an active day. The developer of e-commerce software fell $1.81 to $76.06. Volume surpassed 23 million shares, nearly three times the stock's average of 8.1 million.

Shares of Broadbase Software also tumbled. The software maker said it expects a fourth-quarter loss, excluding acquisition-related costs and other items, of 15 cents to 17 cents a share. Analysts polled by First Call/Thomson Financial expected the company to lose 7 cents. Broadbase fell $3.38, or 24 percent, to $10.63.

Chip stocks turned in a mediocre day. The volatile Philadelphia semiconductor index dipped 3.51 to 671.54 led by Xilinx, which lost $2.74, or 4 percent, to $63.25.

Communication chipmakers also took a hit. Broadcom fell $11.50 to $133 and Applied Micro Circuits stumbled $5.25 to $55.69.